02.12.2015 : Buy IDFC Dec Future @ 53.50
02.12.2015 : Buy IDFC 52.50 Dec PE @ 1.20
02.12.2015 : Buy IDFC Dec Future @ 53.50
02.12.2015 : Buy IDFC 52.50 Dec PE @ 1.20
The following table gives you the big picture of how the market crashes during the last decade.
Markets Date P/E P/B Div.Yield Nifty Index % of Drop
Peak 11-Feb-00 28.47 5.11 0.90 1756 30.29
Bottom 23-May-00 18.40 3.45 1.91 1224
Peak 12-Feb-01 22.73 4.71 1.08 1400 26.78
Bottom 12-Apr-01 14.73 3.30 0.94 1025
Peak 2-Apr-04 21.53 3.64 1.70 1841 24.60
Bottom 17-May-04 12.87 2.74 2.64 1388
Peak 21-Apr-06 21.01 5.41 1.26 3573 26.33
Bottom 14-Jun-06 14.92 3.79 1.83 2632
Peak 8-Jan-08 28.29 6.55 0.82 6288 29.25
Bottom 22-Jan-08 20.96 5.10 1.05 4449
Peak 11-Aug-08 19.49 4.25 1.20 4620 45.36
Bottom 27-Oct-08 10.68 2.12 2.24 2524
Few Points we can learn and under stand from the great falls are:
Stock Market Crashes are inevitable: Stock Market crashes are inevitable. Nobody can avoid the corrections and no one can escape from the corrections by simply investing stocks.
Never commit 100 % of funds: Never commit 100% of the funds any point of time in the stock market. Always be prepared for opportunity (crash or correction) and also be prepared ready with cash in hand. At some point of time when market ends its fall you can start accumulating quality stocks at best valuations.
Buy Low Sell High: One has to under stand that market crashes can be used for accumulating stocks at cheaper prices. To achieve this market mantra “Buy low sell high” one has to be knowledgeable (He/she must know market dynamics or how the market works before investing his funds) patient and quick to seize the opportunity. Sir Claude Maxwell MacDonald British Diplomat once said “Opportunity is a bird that never perches.”
Always check index PE ratio before investing Funds: Always remember there is a market risk involved for the money committed with stock markets. You may be best in picking stocks in the market , your skills are wasted when you put money in over heated condition. The index PE above 20 to be considered as over heated situation, at most caution to be taken to avoid new commitments with markets.
Don’t jump too quickly: Be patient during the crash time and wait for the dust to settle completely. Please do not take chances to invest funds during correction time. The above table tells you corrections usually last at least 3 months to 6 months period and you enough time to react and make decisions.
No Charity Program from Govt: Government is there to earn money every day from the stock markets by charging Service Tax, Securities transaction Tax, Education Cess and stamp duty. There is no charity program available currently from the Governments any where from world for who lost their money in the stock markets, hence be prepared and manage the market crash with your own skills.
Yesterday, I have seen the best movie and Oscar Winner of the year 2004 “Million Dollar Baby” again and the Best Supporting Actor Morgan Freeman explains the fundamentals of the boxing and which is closer to the markets too. In his words “Everything in boxing is backwards, sometimes best way to deliver a punch is step back”.
“Protect yourself at all the times” is the rule in the boxing and likewise
“Preserve your money at all the times” is the rule for investing game.
Whatever rules you formed for investing and filter through above rule gives you a very good frame work for long term investing. If you have greater time horizon then it is always safe to build defensive portfolio. There are far more ways to lose than to win in the market and what you don’t win can’t hurt you. Doing the right thing is really difficult. But not doing the wrong thing may be a bit easier, and a whole lot safer.
Some random tips for Investment success:
Usually a company or an investment theme decays little by little. You have ample time to get out, if you just start.
A good collection of smaller companies is usually more attractive than very big companies.
Catching a change is the most profitable of all investment strategies.
All good investors are contrarians.
An attractive level to buy first class growth stocks has been when PE ratio has been lower than the growth rate and they provide a comfortable yield. They rarely sell for less than twice the multiple of NIFTY.
If you stay with a collection of strongly growing enterprises year after year, you will in time become rich.
The investor should spend almost all the time on learning the facts of the company, not on the stock prices.
05.Nov.2015 : Buy BHEL Future @ 199.3
05.Nov.2015 : Buy BHEL Nov 200 PE @ 9.3
16.Nov.2015 : Buy BHEL Nov 180 PE @ 4.80
26.Nov.2015 : Buy BHEL Dec Future @ 174.50
26.Nov.2015 : Buy BHEL 180 DEC Put @ 10.80
16.Nov.2015 : Close Bhel 200 Put @ 20.50 >> Profit : 22400
26.Nov.2015 : Close BHEL Future @ 173.5 >> Loss : -51600
26.Nov.2015 : Close BHEL NOV 180 PE @ 4.9 >> Profit : 200
1.) Know What You Own – Most people don’t really know the reasons why they own a stock – you should. Ed’s Note: Similar to Ben Graham and Warren Buffet’s Businesslike Investing in your Circle of Competence.
2.) It is Futile to Predict the Economy, Interest Rates and the Stock Market (So Don’t Waste Time Trying) – “If You Spend 13 minutes per year trying to predict the economy, you have wasted 10 minutes” Focus on the “facts” now at hand rather than predictions about the future.
3.) You Have Plenty of Time – to identify and recognize exceptional companies. If you bought WalMart AFTER it rose 10x in its first 10 years, you got another 60x return over the next 30 years. Bottom line: Don’t be in a rush – look at plenty of stocks, but be patient. Note: Buffett’s “Wait for the Perfect Pitch”
4.) Avoid Long Shots – his record was ZERO out of 25 investing in companies with no revenues but a “bright future” to sell. His advice if you run across a company that falls into this category but still excites you – do nothing and write down the name. Look at it again in 6 to 12 months and see if you still think it is good. If it is one of the good ones and went from 5 to 15 while you waited, per point #3 above, you probably still have plenty of time. Note: Following this rule could keep you out of trouble. Benjamin Graham and Warren Buffett talked about avoiding Speculations and focusing on Investments instead.
5.) Good Management is Very Important and Buy Great Businesses – good management is very important – maybe even the most important consideration. It may also be the most difficult item on this list to get right. His advice: look for good companies because a good management in a bad business will probably fail. “Buy a business any fool can manage because eventually one will” Buffett has also observed that when a good management meets a bad business, it is the reputation of the business that generally prevails.
6.) Be Flexible – lots of unexpected things happen, some good and some bad. Many of his best nvestments happened for the “wrong” reasons, i.e. his original thesis was off, but the investment still worked out. Sometimes he was absolutely right about the growth but the investment was still lousy and he did not make any money. So be flexible and humble.
7.) Knowing When to Sell is Hard – before you make a purchase, you should be able to explain why you are buying/own it in terms that an 11 year old could understand – three sentences at most. Remember this reason and sell the holding when the reason no longer continues to hold. Investing well does not take a genius – only need 5th grade math – so math has nothing to do with being a great investor.
8.) There is Always Something to Worry About – and this makes things interesting. The 1950s were one of the best decades to own stocks, but from a geopolitical basis everyone was scared of nuclear war. In the early 1990s, everyone was scared about the Japanese taking over the world and beating America. Not coincidentally, more all-time worst market days occur on Mondays because people have the whole weekend to WORRY. His advice is to forget about all the global bad stuff because the key to good investing is not the brain/intellect, its having the stomach.
Entry: Buy Coal Future @ 325 and buy 320 Put @ 6.70
Exit Coal india Future @ 332.6 and 320 put @ 4.25
Net Profit : Rs.6180
29.Oct.2015 : Buy Lupin Nov Future @ 1930
29.Oct.2015 : Buy Lupin 1900 PE @ 49.50
24.Nov.2015 : Buy Lupin 1850 Nov Put @ 18
26.Nov.2015 : Rollover ( Buy again) Lupin Dec Future @ 1862
26.Nov.2015 : Buy Lupin 1850 Dec PE @ 59
24.Nov.2015 : Close Lupin 1900 Nov PE @ 55 profit >> 1650
26.Nov.2015 : Exit Lupin Nov Future @ 1851 Loss >> -23700
26.Nov.2015 : Close Lupin 1850 Nov PE @ 10.90 Loss >> -2130
Entry : Sell Bajaj Auto @ 2576 and buy 2600 Call @ 7.5
Rollover : exit Current month Bajaj Auto @ 2576 and call @ 0.00 and again Sell Next month
Bajaj Auto @ 2589 and 2600 Call @ 63.00
Exit Bajaj Auto @ 2505 and also exit call @ 30
Net Profit : Rs.9200
27.Oct.2015 : Take Long position in IDEA Oct Future @ 142
27.Oct.2015 : Buy 140 October PE @ 1.00
29. Oct.2015 : Roll Over Idea Future Position to Nov Series @ 140
29.Oct.2015 : Buy 140 Nov PE @ Rs.6.00
16.Nov.2015 : Buy 130 Nov PE @ Rs.3.55
29.Oct.2015 : Close Idea Oct Future @ 141 Loss >> -2000
29.Oct.2015 : Close Idea 140 Oct PE @ 0.00 Loss >> -2000
16.Nov.2015 : Close Idea 140 Nov PE @ 10.9 Profit >> 14700
26.Nov.2015 : Close Idea Nov Future @ 141.10 Profit >> 3300
26.Nov.2015 : Close Idea 130 Nov PE @ .05 Loss >> -10500
Net Profit :: Rs. 3500